Birmingham Real Estate: A False Buyer's Market
Like most places, buying real estate in Birmingham Alabama takes skill, knowledge, and a little good fortune. But lately, home buyers are running into unusual situations with home sellers dictated by the repercussions from the refinance and alternative financing boom that took place over the past few years.
Traditionally speaking...
Typically, home shopping in Birmingham, Alabama goes something like this:
1. Find a Home
2. Write an Offer
3. Expect a Counter Offer
4. Negotiate
5. Reach Agreement
6. Close the Deal
Lately though, buyers are flexing their muscle and attempting to take advantage of the supposed buyer's market conditions throughout the Birmingham real estate market. What is happening though is very interesting and leading to some tough negotiations and a slow down in the Birmingham market.
Currently, the traditional analysis on the Birmingham market would be considered a buyer's market. Home sales are slowing, homes are sitting on the market for longer periods, while more homes are being listed for sale on a daily basis. One would think that this is a prime scenario to pick up some properties at discounted prices. Despite these conditions, home buyers are not getting the great deals they expect! Primarily because there is a new factor altering the resale market making this RealtorŪ think that we are in a "false" buyer's market.
A Brief History
2004, 2005, 2006 Refinance Bonanza
Interest rates in 2004 were at all time lows. People were refinancing, home prices rising, things looked fantastic. 2005, more of the same. 2006 started much the same as the previous two years. But as the year moved on, speculation that the home bubble would burst inevitably slowed the market down while interest rates crawled back up.
The bottom never fell out, but...
Despite the expectation that the bottom would fall out of the real estate market, and in some places nationally you could argue that it had, Birmingham stayed relatively stable. Although home prices came down a few percentage points, there was not the drastic drop in home prices experienced in other areas in the country. This is good news for most. However those home owners that had taken advantage of the low interest rates and cashed out the equity of their homes are finding themselves in precarious positions. Especially if they had used an interest only loan or other alternative financing for the primary note on their home.
Where these home owners find themselves is in a situation where the value of their home had lowered enough to close the gap between amount owed on, and equity left in, the home. Thereby placing them in a position where it can be too expensive to sell and with interest rates on the rise, too expensive to stay!
The resale market is stalling while new construction rises
The situations resulting from the above have altered the normal course of events during a buyers market creating what I call the false buyers market in the resale sector.
How?
Well normally a buyer's market swings the advantage of negotiation to the buyer following a traditional supply and demand curve. What is occurring now though, despite supply being way above demand, is a shift in the curve resulting from the lack of equity found in homes currently being marketed. The result is that sellers are having to ask for higher prices than the current market would normally support, in turn resulting in tougher negotiations. With buyer's being patient and willing to wait until a better deal can be had, Birmingham is experiencing an overall slowing down of the resale real estate market. Although there are some exceptions, see Birmingham Real Estate Price Void, it could be speculated that the ability to negotiate with less limitations financially is why new construction home sales are becoming a larger percentage of home sales throughout the Birmingham area.
And the cradle will rock
Recently buyers and sellers are having difficulties meeting common ground resulting in this "false buyer's market", but unless things change in the seller's favor, eventually Birmingham will explode into a true buyer's frenzy at the expense of the seller.
